FCA proposes to extend the time firms have to handle motor finance commission complaints

Earlier today. on 21 November 2024, the UK Financial Conduct Authority (the FCA) published a press release and a consultation paper setting out its proposals for further changes to complaint handling rules for motor finance commission complaints.

In broad terms:

– the FCA proposes to extend its current rules in DISP Appendix 5 to motor finance non-discretionary commission arrangement (or a DCA) commission complaints;

– the FCA is consulting on two proposals meaning there would be a pause for issuing a final response letter on a non-DCA motor commission complaints to either (a) 4 December 2025 (to align with DCA motor commission complaints) or (b) 31 May 2025;

– the FCA says it will set out its next steps on discretionary motor finance commission complaints in May 2025 and proposes to set out its position on non-discretionary motor finance commission complains at the same time (as it believes that the Supreme Court will have made a decision on whether to give permission to appeal in Johnson v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance [2024] EWCA Civ 1282 by then); and

– the FCA proposes to extend the time to refer a complaint about a non-DCA motor commission complaint to the Ombudsman Service until the later of 15 months from a final response letter, or 29 July 2026.

The deadline for responding to the consultation is 5 December 2024. It is likely that new rules and guidance will be made shortly afterwards.

Financial Conduct Authority publishes two ‘Dear CEO’ letters on authorised push payment fraud reimbursement

On 7 October 2024, the UK Financial Conduct Authority (the FCA) published two ‘Dear CEO’ letters setting what it expects firms to do on authorised push payment (often called ‘APP’) fraud reimbursement. The letters are addressed to:

banks and building societies; and

payment and e-money institutions.

These letters quickly follow the Payment Systems Regulator’s policy statement, PS24/7, which was published on 3 October 2024 setting out new maximum reimbursement limits for APP fraud victims at £85,000 (which followed the Payment Systems Regulator’s press release and consultation on 4 September 2024). That decision came into force on 7 October 2024.

The Dear CEO letters set out the FCA’s expectations. These include:

Anti-fraud systems and control: Firms should have effective governance arrangements, controls and data to detect, manage and prevent fraud, and regularly review their fraud prevention systems and controls to ensure that these are effective. Firms should also maintain appropriate customer due diligence controls (both at onboarding and throughout the relationship).

Consumer duty: There is a perhaps unnecessary reminder that the consumer duty requires firms to avoid causing foreseeable harm. There is an example of such harm: a consumer becoming victim to a scam where a firm has inadequate systems to detect and prevent scams.

On us APP fraud reimbursement: Where there are internal transfers (often called “on us” or intra-firm payments) which do not use an external payment system, the FCA is concerned that consumers may not understand that a different (and lower level) protection will be provided. Firms are required to ensure their approach complies with the consumer duty.

Capital and liquidity: for payment and e-money institutions, the FCA reminds firms to recognise and manage their potential liability and the impact APP fraud may have on their capital and liquidity.

Systems and controls: the FCA says firms must ensure that they have appropriate oversight, systems and controls in place to comply with its requirements.

FCA makes rules and guidance extending pause for handing complaints about motor finance discretionary commission arrangements

On 24 September 2024, the UK Financial Conduct Authority (the FCA) published a press release and Policy Statement 24/11: ‘Extending the temporary changes to handling rules for motor finance complaints’ (PS24/11). PS24/11 effectively implements the changes proposed by Consultation Paper 24/15: ‘Extending the temporary changes to handling rules for motor finance complaints’.

The changes to DISP Appendix 5 come into force 26 September 2024.

The key changes are:

– the pause on the requirement for firms to provide a final response to DCA complaints within 8 weeks, giving complainants the right to go to the Financial Ombudsman (which was due to end on 25 September 2024) will be extended to 4 December 2025 (see DISP App 5.2.1R(2));

– there are new requirements on keeping consumers informed about the pause (see DISP App 5.2.5AR to DISP App 5.2.5CR);

– the timeframe for consumers who receive a final response on relevant complaints to decide whether to refer their complaint to the Financial Ombudsman is extended to 29 July 2026 (at the earliest) (see DISP App 5.2.9R(3)); and

– requirements to maintain and preserve relevant records will remain in place until 11 April 2026 (see DISP App 5.3.1R(2)(b)).

There are some interesting points for firms:

– the FCA makes it clear that PS24/11 is relevant to “motor finance providers” and “motor finance credit brokers, including motor dealers“;

– the FCA’s view is that neither the original pause, nor these changes, “prevent consumers or their representatives from … taking legal action“;

– the ongoing judicial review (which is due to be heard between 15 and 17 October 2024), and the Court of Appeal cases dealing with commissions (where judgment is reserved), are relevant to the FCA’s decision making; and

– because “many motor finance agreements involving DCAs were made, or ended, more than 6 years ago, it is likely that the 3-year rule [on time-barring] will be more relevant for consumers“.

Payment Systems Regulator publishes new Powers and Procedures Guidance

On 20 September 2024, the UK Payment Systems Regulator (the PSR) published an updated version of its guidance entitled ‘Powers and Procedures Guidance’. Section 96 of the Financial Services (Banking Reform) Act 2013 requires the PSR to published guidance.

The guidance updates the PSR’s guidance which was first published in 2015 (and updated in 2020). The PSR’s response paper sets out the changes. These updates include:

– changes to paragraph 5.7 of the guidance: dealing with the process for opening an investigation; and

– changes to paragraph 5.12 of the guidance: dealing with flexibility for staff deployed on monitoring or enforcement to work across functions.

FCA consults on further pause for handing motor finance discretionary commission arrangements

🚨 Earlier today, on 30 July 2024, the FCA published a consultation paper entitled ‘CP24/15 – Extending the temporary changes to handling rules for motor finance complaints’ and a press releaseproposing to extend the current pause to the time that firms have to respond to motor finance complaints about discretionary commission arrangements.

📆 The FCA says it proposes to set out its next steps in May 2025 (and not September 2024).  By then, the FCA says it’ll have analysed: (a) the data it has collected from motor finance firms and (b) the outcome of Barclays’ judicial review of the Financial Ombudsman’s decision to uphold a DCA complaint.

✋ The proposed pause to 4 December 2025 will allow the FCA to (for example) consult on a redress scheme or ask firms to deal with motor finance complaints relating to discretionary commission models.  Firms will not be required to respond to such complaints before 4 December 2025.

📝 The FCA also proposes to give consumers until the later of 29 July 2026, or 16 months from the date of their final response letter, to refer any complaint to the Financial Ombudsman Service.

👨‍💻 The deadline for responding to the consultation is 28 August 2024.

King’s Speech makes no mention of consumer credit reform

Earlier today, on 17 July 2024, King Charles III delivered his King’s Speech setting out the areas of reform for the new Labour Government.

But any consumer credit firms or advisers looking for some mention of reform of the Consumer Credit Act 1974 will be disappointed. There was no mention of such reform either in the King’s Speech, or in the background briefing notes.

It therefore remains to be seen whether there will be any further consultation issued by HM Treasury. The Government’s website simply says that the “consultation has concluded“. No further updates have been added since 11 July 2023. But there is surely a long overdue need for reform: the current system is notoriously complex and often works in a way which does not promote innovation.

Automated Vehicles Act 2024 receives Royal Assent

On 20 May 2024, the Automated Vehicles Act 2024 received Royal Assent. The Act says that it will regulate the use of automated vehicles on roads and other public locations, and introduce provisions on vehicle automation. The UK Government also published a news story.

Some of the key points of the Automated Vehicle Act 2024 are:

– It sets out a scheme of authorisation for automated road vehicles (see Part 1). This includes (a) a system of authorisation (see Chapter 1 of Part 1), (b) licensing of operators for vehicle use without a user-in-charge (see Chapter 2 of Part 1), (c) provisions allowing regulatory bodies to ask for information (see Chapter 3 of Part 1), (d) introducing investigatory powers (see Chapter 4 of Part 1), (e) introducing civil sanctions against regulatory bodies (see Chapter 5 of Part 1) and (f) making other regulatory powers and duties (see Chapter 6 of Part 1).

– It introduces criminal liability for vehicle use (including stop and seize powers an offence of using a vehicle without driver or licenced oversight).

– It gives powers to the Police including stop and seizure powers (see Part 3).

The Act will come into force on a future date. The Secretary of State will need to make a commencement order.

Financial Conduct Authority publishes principles for developing credit information industry-led remedies

On 20 May 2024, the UK Financial Conduct Authority published principles for developing credit information industry-led remedies.

In December 2023, the FCA published its final report on the credit information market study. The FCA proposed that various remedies should be introduced by industry-led work (including input, where necessary, from the FCA).

The FCA’s final report expects the Credit Reporting Governance Board (the CRGB) will seek input to progress and implement industry-led remedies. The FCA has therefore published the following principles pending the CRGB’s formation:

1 Seek and consider input from all relevant stakeholder cohorts (including, but not limited to, stakeholder cohorts represented on the Interim Working Group (the IWG)).

2 Proactively consider how any steps or decisions might negatively affect the CRGB’s ability to decide longer-term policy or implementation options.

3 Consider how potential approaches or solutions align with the CIMS proposals, the emerging CRGB objectives being developed by the IWG and the Consumer Duty.

4 Specifically consider the impact on different firms (including small businesses) and consumers, including by taking into account effects on:

4.2 customers with characteristics of vulnerability, and

4.1 financial inclusion

FCA publishes policy statement and finalised guidance on ways consumer credit and mortgage firms should support customers in financial difficulty

Earlier today, on 10 April 2024, the UK Financial Conduct Authority published a press release and Policy Statement, PS24/2, setting out the new rules and guidance which will apply to consumer credit and mortgage firms to support customers in financial difficulity.

The FCA has also published updated finalised guidance, FG24/2, and a press release.

The changes made to both CONC and MCOB by PS24/2, and FG24/2, will come into force on 4 November 2024.

We’ve set out a summary in a one page infographic (if you click the infographic it should be larger):

If you want a PDF copy, please contact your usual contact at Walker Morris LLP.

FCA publishes data on Mortgage Charter uptake

On 22 March 2024, the UK Financial Conduct Authority published data on firms who have signed up to the Government’s Mortgage Charter.

The key points are:

– There are 48 signatories to the mortgage charter (making up around 90% of the mortgage market).

– The data suggests at least 760,000 accounts benefitted from one or more of the options set out in the Charter.

– Around 90,543 mortgage accounts have temporarily reduced their monthly payments under the FCA new rules.

– Between July 2023 and January 2024, the monthly payments on around 123,000 accounts were reduced as people switched to temporarily paying interest-only or extended their mortgage term (making up around 1.4% of the regulated mortgage contracts). Only 103 term extensions were reversed.

– The data says 67 properties were repossessed within 12 months of missing the first payment. Firms say these were for customer-driven reasons.

– It is difficult to estimate the total number of borrowers who have taken up one or more of the options set out in the Charter.

– The FCA reminds firms that the options under the Charter form only part of the support. All borrowers can contact their lender and discussion their options (see, for example, the industry’s ‘Reach Out’ campaign. This support could include contract variations or appropriate forbearance measures.